| Thu 5 May 2011, 8:07 | | LAF - Lonrho - Lonrho reports 37% Growth in revenue in Q2 and Profit |
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LAF
LOLAF
LAF - Lonrho - Lonrho reports 37% Growth in revenue in Q2 and Profit
Improvement of GBP4.2m at the half year
Lonrho Plc
(Incorporated and registered in England and Wales)
(Registration number 2805337)
(Share code: LAF; ISIN number: GB0002568813)
("Lonrho" or the "Company" or the "Group")
These results (and comparative figures included therein) do not form
audited accounts nor have they been extracted from audited accounts. The
results disclosed in this trading update may potentially be subject to
adjustments during the year-end audit in respect of goodwill valuations
and other minor items. The comparative figures used are year on year due
to the influence of seasonality within the different businesses in the
Group.
Lonrho reports 37% growth in revenue in Q2 and profit improvement of
GBP4.2m at the half year
Lonrho Plc ( LONR ) today announces its unaudited results for the second
quarter to 31 March 2011. The unaudited interim results for the six
months to 31 March 2011 will be announced by the end of May.
Lonrho is delighted that it was admitted to the Main Market of the London
Stock Exchange as a Premium Listing with effect from 26th April 2011. The
Directors believe that a listing of the Company`s ordinary shares on the
Official List is the most appropriate platform for the continued growth
of the Company. Specifically, the Company`s Board anticipates that
trading on the London Stock Exchange`s Main Market will raise the
Company`s profile and provide the ability for a broader range of
institutional and other investors from around the world to have the
ability to participate in the Company.
On admission to the Main Market, the Rt. Hon Sir Richard Needham joined
the Board as an independent Non-Executive Director. Sir Richard has had a
distinguished career in Parliament culminating in his time as Britain`s
longest serving Minister in Northern Ireland from 1985 - 1992 and as
Minister of Trade from 1992 - 1995. Sir Richard left politics in 1997 and
has since focused on the private sector, and has been a director of GEC
Plc, Meggitt Plc, and currently is the Vice Chairman of NEC Europe Ltd.
He has been on the Board of Dyson Ltd for over 15 years, and is currently
the Senior Independent Director. He has been Non-Executive Chairman of
Avon Rubber Plc since January 2007.
During the quarter the Group also announced the completion of the
purchase of the AFEX group of companies. AFEX`s main focus of operations
is in supplying services and secure accommodation in Juba, Southern
Sudan. This infrastructure is in great demand from corporate clients,
NGO`s and Government Aid Agencies working in Southern Sudan. Juba is
forecast to be one of the fastest growing cities globally following the
referendum establishing Southern Sudan as an independent country. Lonrho
has purchased 100% of AFEX for an initial cash consideration of US$3
million and an EBIT related, capped earn-out payment. The existing
management of AFEX will remain in place to develop and grow the company
during the transitional period.
Financial highlights for the second quarter include:
- Group turnover from continuing operations in the quarter has
increased 37% ahead of the same quarter in the prior year to reach
GBP33.5m. For the half year the turnover of GBP61.1m is 29% ahead of
the first half of FY10.
- In the second quarter of 2011 the Group has achieved EBITDA of
GBP1.9m, a GBP2.7m improvement on the second quarter of 2010. The
six months to March have seen EBITDA rise to GBP3.6m, GBP6.1m ahead
of the same point in the prior year.
- In the first half, the loss before tax was GBP2.9m. When compared to
the prior year, and after excluding an exchange gain of GBP5.7m in
that year (current year GBPnil), this represents an underlying
improvement of GBP4.2m.
- Net assets at 31 March 2011 stood at GBP123.7m, compared with
GBP124.5m as at 31 December 2010.
Cash balances in the Group at 31st March 2011 were GBP17.8m.
Divisional highlights for the quarter include:
Agribusiness
The agribusiness division has increased turnover during the quarter by
33%, a GBP4.1m increase on the same quarter of FY10 to GBP16.5m for the
quarter. Oceanfresh and Trak-Auto both had their best quarters since
becoming Lonrho companies.
- In the first half of FY11, as planned, Rollex (100% holding) has
refocused its strategy around pure vertically integrated
agribusiness with less emphasis on general logistics. As a result
revenues in the quarter fell by 11.6% compared to the prior year but
the focus on the core business and new good margin opportunities for
produce from formal growing agreements in Mozambique, Zambia and
Zimbabwe position the business well for core business growth in the
second half of the year. The comparison for Rollex in FY10 also
includes the Peninsula business which locked exclusive supply to the
Woolworths retail chain. This was disposed of in November 2010 to
strategically diversify supply to other retailers and have no
exclusive lock-in agreements that restrict growth. This strategy is
now showing results with alternative retail clients and excluding
Peninsula revenue of GBP2.1m, turnover grew by 12.3%.
- During the quarter a significant new sea-freight opportunity was
commenced, shipping citrus products from Cape Town to customers in
the Far East. The planned delivery schedules will generate
significant additional revenue through the second half of 2011 and
into FY12.
- In the USA, Oceanfresh (51% holding) ran a very successful Lent
promotion on 3 items with Costco on the West Coast. Costco continues
to increase the distribution and range of Oceanfresh lines to
further stores within the Costco Group. Also in the US, Oceanfresh
products have now been rolled out to a further major US retailer
(Fresh & Easy). In the UK, Oceanfresh will launch the Kiddies Magic
Fish range with Costco UK in May and is expected to start supplying
fresh seafood to ASDA in the near future.
- In South Africa, Oceanfresh has launched its own brand of coated
fish items with Makro, which has been extremely successful. As a
result, the product will change to the Makro private label in June
2011 substantially increasing sales volumes. Oceanfresh is also
working on expanding operations within the Massmart group, to
include the Shield stores. Oceanfresh has also won a contract for
the first time with South Africa`s largest retailer, Pick `n` Pay,
to supply 16 product lines both domestically and internationally,
which will commence towards the end of FY11.
- Oceanfresh has further secured its first orders for the Far East,
where it will be supplying retail lines to Carrefour stores.
- Oceanfresh is in the process of relocating to bigger premises in
Johannesburg to meet forecast demand and increase in-house
capabilities. The new facility, which will quadruple capacity,
includes a 500 tonne cold store unit, a high-care processing area
and a general processing area. The new facility will allow
Oceanfresh to further increase the export and local retail lines
available for customers.
- Trak-Auto (100% holding) had its strongest quarter in its history
with turnover of GBP2.6m, 34% ahead of the first quarter. Trak-Auto
has significantly increased the John Deere market share in
Mozambique. The order book is also strong with 32 new John Deere
units ordered and 3 Komatsu units in the quarter.
Transport
On a revenue basis, the transport division has had a strong quarter.
Turnover for the division was 18% higher than in the same quarter of
FY10, with all of the major markets showing good growth. Most pleasing
is the growth in Tanzania where new routes have helped to increase
turnover in excess of 300% compared to Q2 FY10.
- Fly540 Kenya (49% holding + board control) has been successful in
increasing the number of passengers being flown, being 25% higher
than the same quarter in FY10. Despite the continued strong presence
of competition in the market which has depressed prices on some
routes, revenues for Kenya have grown by 8% compared to the same
quarter in the prior year.
- The first scheduled operational flights for Fly540 Angola (60%
holding) commenced on 31 January 2011. The deployment of the Angolan
hub has been building as new aircraft arrive in the country. This
has been a slow initial process. Since the quarter end business has
been building with three aircraft operating scheduled services in
May with a plan for five to be operating scheduled services by the
end of July. Regular services between Cabinda, Soyo and Luanda have
ensured that operating systems and procedures are working
efficiently and initial flights in Angola have proved successful
with load factors on the routes being served over 40% prior to any
marketing activity taking place or brand recognition. An encouraging
start.
- Operations at Fly540 Ghana (60% holding), following the set
strategy, will commence towards the end of FY11. Management will
ensure that the Angola hub is bedded in before focusing attention
and human resources on the launch of the Ghana hub for West Africa.
- With new routes now being operated, Fly540 Tanzania (90% holding)
experienced its most productive quarter ever. With load factors over
80% and over 15,000 passengers flown in the quarter to 10
destinations, Fly540 Tanzania has entered a new phase of expansion
with further investment being made in the business in order to gain
the full reward from the opportunity.
- Operating margins have remained low in the aviation division due to
the continuing price war in Kenya and the rising price of fuel.
These issues have recently begun to ease with the price war
diminishing and fuel surcharges being introduced, therefore margins
in March were above those seen in the first two months of the
quarter.
- Fly540 Kenya has recently announced it intends to commence flights
from Nairobi to Juba. Operations are scheduled to commence in May,
with the additional revenues being seen in Q3 FY11. Demand for
flights to the Southern Sudan region is steadily increasing driven
by investors, financial service providers and industrialists, all
looking to make the most of the prospects of the region since its
independence vote in January.
Infrastructure
The Infrastructure division has experienced revenue growth in the quarter
of 12% over the same period in FY10. Both companies in the division have
had good successes in the quarter which underpin confidence in their
future. The order book at KwikBuild is standing at a record high, with in
excess of R42m of new orders taken in the quarter. Important works have
been completed at Luba to accommodate new clients arriving in the second
half of the year.
- During the quarter Luba Freeport (63% holding) saw the completion of
facilities for Dickerman, with rent commencing on 1 March 2011 and a
further open storage and inspection area for Tenaris was also
completed in the quarter, for which rents commenced on 1 January
2011. Both of these facilities will help generate further fixed
revenues, with the Tenaris facility also leading to more movements
across the quay, increasing the variable element of income.
- Luba Freeport also took delivery of its mobile container scanner in
the quarter. Installation and training on use of the scanner is now
underway, with the first revenues to be generated from the scanner
from June. This increases the ports security in line with
international practices.
- Luba saw supply vessel movements in the port total 275, a marginal
fall of 1% on Quarter 1 due in part to delays in the launch of two
new offshore projects with Ophir and Rocoil which are now scheduled
to commence in the second half of the year.
- Luba has had confirmation that Technip, a leading engineering and
project management company, will be performing work out of the port.
Further to this the start up of SBM`s project with Noble Energy has
been confirmed, with materials arriving for preparation works prior
to the arrival of a floating production, storage and offloading unit
(FPSO) before the end of 2011.
- In February KwikBuild (51% holding) won the largest part of the IDT
Emergency Schools programme, having been selected to provide 103
classrooms to replace mud and storm damaged classrooms in the
Eastern Cape. The first stage of this project is worth over R20m in
revenue and demonstrates the company`s ability to successfully
compete for large scale projects, which should in turn help to
increase margins through the economies of scale.
- KwikBuild has also mobilised its SAPS (South African Police Service)
contract to support the installation of Trauma Victim and other
Units. SAPS is a new client to KwikBuild and the contract is again
significant, demonstrating a broader client-base and focus on higher
value deals. Mobilisation has gone well and already led to further
direct business from other SAPS units.
- Orders in the second quarter for KwikBuild totalled in excess of
R42m, representing a new record for the business. Turnover for the
quarter of GBP1.5m is the largest it has achieved and with the
factory operating three shifts the strategic restructure of
KwikBuild has proven to be a good decision and has created a
substantially stronger company ready for further growth.
Hotels
The hotels division enjoyed a good quarter, driven both by exceptional
occupancy at the Hotel Cardoso and some improvement at the Grand Karavia.
March trading at the Grand Karavia, as well as the latest quarter, have
been the best seen to date with both occupancy and room rates higher than
previous months as the hotel continues to move towards its full business
plan, after a slower than expected start.
- At the Hotel Cardoso (59% holding) occupancy has been high,
averaging over 85% since January. High occupancy at the hotel has
also been backed up by strong room rates, with March`s average room
rate rising to $153, a 37% increase on the same period a year ago.
- Compared to the same quarter in the prior year, the Mozambique
Metical has devalued 17% against sterling. This movement has had the
effect of reducing reported turnover from the Hotel Cardoso by
GBP0.2m. Despite this movement in exchange, revenues for the quarter
have grown by 7% compared to Q2 FY10.
- During March occupancy at the Grand Karavia (50% holding +
management contract) was approaching 50% - its highest level since
opening in June 2010. The growth in occupancy has been driven by a
new sales and marketing strategy, including representation at
INDABA, the African mining conference. The hotel has also seen
changes in personnel and growth is expected to continue in the
second half.
- Lonrho Hotels has successfully signed a new lease in the Gabon
capital of Libreville. The 49 room, 5-star boutique hotel is
scheduled to check-in its first guests in July 2011 and is
anticipated to trade as the top five star hotel in Gabon.
- Lonrho Hotels Management Services has seen other projects which it
had hoped to sign in Q2 slip into the second half of the year.
Additional management contracts are now expected to be signed during
the second half of the year with revenues accruing in the fourth
quarter.
Support Services
Throughout the support services division there have been strong contract
wins. The success in big contracts was especially prevalent in CES Zambia
where revenue was GBP0.6m, which was GBP0.5m or 500% ahead of the same
quarter in the prior year, demonstrating the viability of the CES roll
out through Southern Africa. Despite the impact of the weaker metical,
which lowered turnover by GBP0.2m, Bytes & Pieces managed to increase
turnover by 15% in the quarter compared to the prior year. AFEX group was
also added to the division during the quarter, adding additional
revenues.
- Bytes & Pieces (65% holding) has had a number of successes in the
period. These include new contract wins as well as completing
important projects for a number of clients. New client wins in the
quarter include Banco Unico, where a production and disaster
recovery platform is being installed, Assoiacao Nacional de
Estradas, where the first sale of a Dell blade in Mozambique has
been made with installation underway, and Maputo Port Development
Corporation with whom Bytes & Pieces are converting their current
infrastructure to VMWare.
- The biggest contract win in the quarter for Bytes & Pieces was at
Bank BCI Formento, where nearly US$2m worth of contracts have been
won to supply and install Dell servers, Riverbed WAN optimisation as
well as Cisco networking and services.
- Bytes & Pieces has recently won a number of awards from PMR Africa,
a leading consulting and research firm across Africa, including
being the highest rated IT consulting company in Mozambique and also
the highest rated IT sales and service company in Mozambique.
- CES Zambia (40% holding + board control) has had an exceptional
quarter with growth being driven by a number of new contract wins.
Among these were Africonnect, FHI (USAID) and World Vision with new
orders being in excess of US$300k.
- AFEX (100% holding), whose purchase was completed during the
quarter, has continued to progress under Lonrho ownership. Key to
the AFEX business is the Riversdale Lodge in Juba, on which a new 16
year lease has been signed. Since acquisition the camp has added 18
new VIP containerised accommodation units, expanding the camp`s
revenue generating potential.
- AFEX has also had further wins for a contract to provide the camp
and services for a seismic exploration in Kenya and a short term
contract to erect a tented camp in Ethiopia. The contract to provide
security services for the World Bank in Sudan was also renewed for
another year and the contract to provide security services for Tri
Star in Sudan was extended to eight new locations.
- Lonrho Water`s bulk water business (100% holding) is beginning to
gain momentum, with the business starting two sizeable projects in
Q2 being a sewage pump station in Luanda and six solar powered
boreholes in South Africa. Both of these projects have resulted in
additional opportunities from the respective clients, with two more
pump stations and a Sewage treatment plant in Angola and 30
additional boreholes in South Africa being quoted.
In the corporate water bottling business, the prime target client in
South Africa, Fedics, has been secured and volumes will begin to grow
steadily from this customer. In addition several new smaller customers
are being secured every month, which all contribute to the ongoing growth
of the business.
Outlook
Lonrho has had a good start to the financial year. Having completed the
placing of a convertible bond and also securing admission to the London
Stock Exchange`s Main Market as a Premium Listing, the Company is well
placed to take advantage of the opportunities which present themselves in
the second half of the year. The Company is focused on ensuring that the
strategies it puts in place will continue to deliver year-on-year growth
for the rest of this year and into FY12.
Oceanfresh remains a strong contributor to growth. The business is
continuing to add new customers both in South Africa and internationally,
specifically seeing strong demand from the US, as well as extending the
range of products being offered. Trak-Auto, with a strong order book
going into the second half of the year is on track to deliver excellent
results and LonAgro, the John Deere distributor in Angola should begin
generating revenues in the next quarter.
The Company has seen short-term delays affect the speed of deployment in
some of the growth businesses such as the roll out of Fly540 Angola but
these are now coming on track and delivering promising results. It is
anticipated that there will be 10 routes operational in Angola by the end
of the year with more following in FY12. Margins in the aviation division
in Kenya remain under pressure due to high levels of competition in the
Kenyan market.
The Grand Karavia hotel had a slow start following opening but results in
the last 8 weeks have been encouraging. The pipeline of potential new
hotel projects is strong with opportunities identified by the new
management team.
The 2010 financial year saw exceptional foreign exchange gains of GBP6.9m
arising on the re-translation of intercompany loans whilst the effect of
currency fluctuations for FY11 remain unclear. The devaluation of the
Mozambique Metical and the strength of the South African rand continue to
exert pressure on several of the Group`s businesses.
The overall trading performance of the Group for the first half has shown
significant progress on the previous year, and the second half of the
financial year is expected to deliver further increased improvement on
the underlying 2010 results.
David Lenigas, Lonrho`s Executive Chairman, commented:
"The results for the half year are positive, showing a 33% increase in
turnover for the past quarter and a 29% increase in turnover for the six
months when compared to the previous year. EBITDA for the Company for the
second quarter was GBP1.9m with a total for the half year improving by
GBP6.1m over the same period last year.
We are seeing strong growth across all of the five divisions of Lonrho in
all seventeen countries where we operate. Sub Saharan Africa is
attracting growing interest from global investors as the significance of
the oil, gas, mineral and agriculture potential of the continent becomes
clearer. These are fundamental resources of significant importance to the
rest of the world. This, combined with the domestic market generated from
a population approaching one billion people, is driving continuing growth
in Africa."
3 months to
31 31
March March
2011 2010 Variance Var %
GBP000s GBP000s
Agribusiness Division
Turnover 16,502 12,386 4,117 33.2%
Gross Margin 17.2% 18.5% -1.3% -
Gross Profit 2,831 2,286 545 23.8%
Transportation Division
Turnover 5,492 4,642 850 18.3%
Gross Margin 18.2% 8.9% 9.4% -
Gross Profit 1,002 411 590 143.5%
Support Services Division
Turnover 5,165 2,496 2,669 106.9%
Gross Margin 24.7% 32.0% -7.2% -
Gross Profit 1,276 797 479 60.1%
Infrastructure Division
Turnover 4,225 3,771 454 12.0%
Gross Margin 42.8% 49.5% -6.6% -
Gross Profit 1,809 1,865 -56 -3.0%
Lonrho Hotels Division
Turnover 2,151 1,272 880 69.2%
Gross Margin 67.9% 70.1% -2.2% -
Gross Profit 1,462 892 570 63.9%
Group Turnover 33,536 24,566 8,969 36.5%
Group Gross Profit 8,380 6,252 2,128 34.0%
Group EBITDA 1,910 -820 2,730 N/a
6 months to
31 31
March March
2011 2010 Variance Var %
GBP000s GBP000s
Agribusiness Division
Turnover 31,653 23,897 7,756 32.5%
Gross Margin 17.0% 18.0% -1.0% -
Gross Profit 5,370 4,302 1,068 24.8%
Transportation Division
Turnover 10,066 9,818 248 2.5%
Gross Margin 12.0% 9.6% 2.4% -
Gross Profit 1,206 943 263 27.9%
Support Services Division
Turnover 7,820 4,873 2,947 60.5%
Gross Margin 27.4% 30.4% -3.0% -
Gross Profit 2,145 1,482 663 44.8%
Infrastructure Division
Turnover 7,431 6,370 1,061 16.7%
Gross Margin 49.4% 47.2% 2.2% -
Gross Profit 3,669 3,008 661 22.0%
Lonrho Hotels Division
Turnover 4,171 2,361 1,810 76.7%
Gross Margin 67.5% 68.8% -1.2% -
Gross Profit 2,817 1,623 1,194 73.6%
Group Turnover 61,140 47,319 13,821 29.2%
Group Gross Profit 15,208 11,359 3,849 33.9%
Group EBITDA 3,552 -2,514 6,066 N/a
5 May 2011
South African sponsor
Java Capital
Date: 05/05/2011 08:07:05 Produced by the JSE SENS Department.
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